“This planet has – or rather had – a problem, which was this: most of the people living on it were unhappy for pretty much of the time. Many solutions were suggested for this problem, but most of these were largely concerned with the movements of small green pieces of paper, which is odd because on the whole it wasn’t the small green pieces of paper that were unhappy.” – Douglas Adams

In this pithy paragraph, the sorely missed Douglas Adams sums up a puzzling paradox of modern life – we often link happiness to money and the spending of it, even though both proverbs and psychological surveys suggest that the two are unrelated.

Across and within countries, income has an incredibly weak effect on happiness once people have enough to secure basic needs and standards of living. Once people are lifted out of abject poverty and thrown into the middle class, any extra earnings do little to improve their joie de vivre. Time trends tell a similar story; even developed countries that have enjoyed economic booms have seen plateauing levels of satisfaction.

I can’t get no… satisfcation

But a new study reveals that money can indeed buy happiness… if it’s spent on others. Elizabeth Dunn from the University of British Columbia wanted to see if there were ways of channelling the inevitable pursuit of money towards actually making people happier. Together with Lara Aknin and Michael Norton, she asked a representative group of 632 Americans to disclose their average monthly expenditure and to rate how happy they were.

She found that personal spending, including bills, living expenses and treats for oneself, made up 90% of the average outgoings but had no bearing on satisfaction. On the other hand, people who spent more money on others by way of gifts or charitable donations, were much happier for it. That either suggests that selfless spending increases happiness, or just that happier people are more likely to plump up more money for friends or charities.

Dunn sought out firmer conclusions by watching what happened to people who received an unexpected windfall. She surveyed 16 employees at a Boston firm who were given a bonus that ranged from $3,000 to $8,000. About two months later, Dunn grilled them about how they had spent the money and again, regardless of the size of the bonus, those who devoted more of their windfalls to selfless ends ended up happier, while those who splashed out on themselves did not. To paraphrase a saying, it’s not how much you have, it’s what you do with it that counts.

Finally, Dunn tested this theory through an experiment. She gave 46 people either $5 of $20, and an afternoon to spend it. Half of the lucky volunteers were told to splurge on themselves, while the other half had to buy a gift for someone else or to give the money to charity. By the evening, the charitable individuals felt happier than they did in the morning while the self-spenders did not, regardless of which bill they were given, and despite the fact that they were acting on instructions.

Hey big spender

Dunn’s results have far-reaching implications. For a start, they suggest that many people are seeking happiness by spending money in the way that is least likely to actually make them happy in the long run – chasing after expensive consumer goods that will give them a mere temporary fix of pleasure. The modern obsession with personal spending is rather like running on a hedonic treadmill.

And in a deeply ironic twist, the types of behaviour that allow money to buy happiness are subverted by the presence of, you guessed it, more money! Higher incomes bring greater self-sufficiency and as people start to need less help themselves, they tend to provide less for others. In psychological experiments, just the mere thought of money made people less likely to donate to charity, help acquaintances or spend time with friends, exactly the types of behaviour that are linked to happiness.

An emerging viewpoint from the science of happiness is that a persons’ circumstances in life – their income, jobs and so on – tend to have limited long-term effects on their happiness. People mentally adapt to stable situations unless they learn to actively engage with their circumstances – simply put, savour the moment or your goalposts will shift. This latest study is consistent with this idea, for it showed that the way in which money is spent has a greater bearing on contentment than how much is made.

There is a silver lining then. While Dunn’s work implies that of selfless spending is the key to happiness, it also suggests that you don’t need to pauperise yourself to do it. The experimental study suggested that paying as little $5 towards a selfless cause can result in a significant spike in happiness. Given that the volunteers in the first study only spent 10% of their earnings on other people, there is plenty of leeway for purchasing a bit of pleasure.

And if all of that seems obvious in hindsight, consider this: when Dunn asked a fresh group of 109 people about the things that would make them happiest, she found that they were, on average, doubly wrong. A majority of 63% predicted that personal spending would make them happier than selfless spending while 86% said that they would be happier with the $20 bill than the $5 one. Those are certainly the intuitive answers, but they are not the empirical ones. Which would you believe?

Comments (12)

Dennis

I am willing to sacrifice my own happiness if anyone wants to spend some money on me!
I don’t know if money buys happiness, but in my experience poverty won’t; I’d like to give the otherside a try.
Great post, in all seriousness.

I can attest to the truth in this. Having been diagnosed with clinical depression and finally deciding that two broken wrists means no more union construction work, I am now retired with full disability pension and SS payments each month. I am a hermit with very little needs so, I give money away like it’s water. (To family members) I pay for lessons for the granddaughters, stock the refrigerator with items far too extravagant for the other household members to afford, etc. I am positive that I would be no happier were I to keep it all to myself, though as an old grouch, I have no problem telling off examples of presumption. I choose to be a family ATM; I feel no obligation that I HAVE to do anything.

I don’t know what is more disgusting. The possibility that this study is completely bogus or the possibility that it might be true. If people have decided that they need poor people to serve in order to make them happy, then I guess it is a good thing there will always be poor people.

Riiiiight… well, I guess you could see it like that, if you wanted to be completely insane about it. At no point during the study is any judgment made about the income of people who are donated to! It says that spending money selflessly is more likely to make you happy than spending it on yourself.
And please note the bit very early on where I mention research which shows that increasing income does make people happier once it lifts them out of poverty but has little effect beyond securing basic needs and living conditions.

Hmm… Let’s look at it mathematically.
Money, as we can all attest to, grants power (MONEY=POWER). Knowledge is also power (KNOWLEDGE=POWER). Therefore, money is a form of knowledge (MONEY=POWER=KNOWLEDGE, or MONEY=KNOWLEDGE).
Ignorance is bliss (IGNORANCE=HAPPINESS). And of course, ignorance and knowledge are inversely related (IGNORANCE=1/KNOWLEDGE)…
Therefore…
MONEY=1/HAPPINESS
So if you spend money on others, your money value drops, and the inversely related happiness value rises. Seems to make sense.
[/stupid]

I love it. Here’s another version from a while back:
According to physical law, Power = Work/Time
However, they say that knowledge is power, and that time is money. Substituting those into the equation, we see that Knowledge = Work/Money
Rearranging that, we see that Money = Work/Knowledge.
This means that the less knowledge you have, the more money you earn, regardless of how much work you do. I think that explains a lot about the world

Heh, I’m at a point in life where spending on myself would make me very happy. But then again I never really bought random crap and only buy what I deem directly necessary or very beneficial (if they’re not good investments in my life, why bother? Clutter stresses me out.)
I would however be quite happy to spend the money on people I want to see doing better, as well as being miserable to spend money on people I do not want to help.

People tend to believe spending money on themselves makes the most happy, but forget that sharing with others brings them real joy. We are taught to be greedy. Somehow we don’t treat seriously all the stories of people who had everything and were still deeply unhappy.
Erich Fromm’s ‘To Have Or To Be?’ includes very insightful analysis of this.